Additional
Information about JPMorgan Financial, JPMorgan Chase & Co. and the Notes
You may revoke your offer to purchase the Notes at
any time prior to the time at which we accept such offer by notifying the agent. We reserve the right to change the terms of, or
reject any offer to purchase, the Notes prior to their issuance. In the event of any changes to the terms of the Notes, we will
notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes
in which case we may reject your offer to purchase.
You should read this pricing supplement together with
the accompanying prospectus, as supplemented by the accompanying prospectus supplement, relating to our Series A medium-term notes
of which these Notes are a part, and the more detailed information contained in the accompanying product supplement and the accompanying
underlying supplement.
This pricing supplement, together with the documents listed below, contains the terms of the Notes and
supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative
pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other educational
materials of ours.
You should carefully consider, among other things, the matters set forth in the “Risk Factors”
sections of the accompanying product supplement and the accompanying underlying supplement, as the Notes involve risks not associated
with conventional debt securities.
Our Central Index Key, or CIK, on the SEC website
is 1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, the “Issuer,” “JPMorgan
Financial,” “we,” “us” and “our” refer to JPMorgan Chase Financial Company LLC.
Observation
Periods, Observation End Dates and Coupon Payment Dates
Observation Periods Ending on the
Following Observation End Dates
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Coupon Payment Dates /
Call Settlement Dates (if called)
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December 28, 2016
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January 5, 2017
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March 28, 2017
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April 4, 2017
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June 28, 2017
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July 6, 2017
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September 28, 2017
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October 5, 2017
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December 28, 2017
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January 5, 2018
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March 28, 2018
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April 5, 2018
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July 30, 2018* (the Final Valuation Date)
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August 6, 2018* (the Maturity Date)
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*The
Notes are not callable
at JPMorgan Financial’s election on the Final Valuation Date. Thus, the Maturity Date is not a Call Settlement Date.
Each of the Observation End Dates, and therefore the Coupon Payment
Dates, is subject to postponement in the event of a market disruption event and as described under “General Terms of Notes
— Postponement of a Determination Date — Notes Linked to a Single Underlying — Notes Linked to a Single Underlying
(Other Than a Commodity Index)” and “General Terms of Notes — Postponement of a Payment Date” in the accompanying
product supplement.
What
Are the Tax Consequences of the Notes?
You should review carefully the section entitled “Material
U.S. Federal Income Tax Consequences” in the accompanying product supplement no. UBS-1-I. In determining our reporting responsibilities
we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons
and (ii) any Contingent Coupons as ordinary income, as described in the section entitled “Material U.S. Federal Income Tax
Consequences — Tax Consequences to U.S. Holders — Notes Treated as Prepaid Forward Contracts with Associated Contingent
Coupons” in the accompanying product supplement. Based on the advice of Davis Polk & Wardwell LLP, our special tax counsel,
we believe that this is a reasonable treatment, but that there are other reasonable treatments that the IRS or a court may adopt.
Sale, Exchange or Redemption of a Note.
Assuming
the treatment described above is respected, upon a sale or exchange of the Notes (including upon early redemption or redemption
at maturity), you should recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange
and your tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming Contingent Coupons are properly
treated as ordinary income, consistent with the position referred to above). This gain or loss should be short-term capital gain
or loss unless you hold the Notes for more than one year, in which case the gain or loss should be long-term capital gain or loss,
whether or not you are an initial purchaser of the Notes at the issue price. The deductibility of capital losses is subject to
limitations. If you sell your Notes between the time your right to a Contingent Coupon is fixed and the time it is paid, it is
likely that you will be treated as receiving ordinary income equal to the Contingent Coupon. Although uncertain, it is possible
that proceeds received from the sale or exchange of your Notes prior to an Observation End Date but that can be attributed to an
expected Contingent Coupon payment could be treated as ordinary income. You should consult your tax adviser regarding this issue.
As described above, there are other reasonable treatments
that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially
affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax treatment
of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require investors
in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics,
including the character of income or loss with respect to these instruments and the relevance of factors such as the nature of
the underlying property to which the instruments are linked. While the notice requests comments on appropriate transition rules
and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially
affect the tax consequences of an investment in the Notes, possibly with retroactive effect. You should consult your tax adviser
regarding the U.S. federal income tax consequences of an investment in the Notes, including possible alternative treatments and
the issues presented by this notice.
Non-U.S. Holders — Tax Considerations
.
The U.S. federal income tax treatment of Contingent Coupons is uncertain, and although we believe it is reasonable to take a position
that Contingent Coupons are not subject to U.S. withholding tax (at least if an applicable Form W-8 is provided), a withholding
agent may nonetheless withhold on these payments (generally at a rate of 30%, subject to the possible reduction of that rate under
an applicable income tax treaty), unless income from your Notes is effectively connected with your conduct of a trade or business
in the United States (and, if an applicable treaty so requires, attributable to a permanent establishment in the United States).
If you are not a United States person, you are urged to consult your tax adviser regarding the U.S. federal income tax consequences
of an investment in the Notes in light of your particular circumstances.
Non-U.S. holders should also note that recently promulgated
Treasury regulations imposing a withholding tax on certain “dividend equivalents” under certain “equity linked
instruments” will not apply to the Notes.
FATCA
. Withholding under legislation commonly
referred to as “FATCA” could apply to payments with respect to the Notes that are treated as U.S.-source “fixed
or determinable annual or periodical” income (“FDAP Income”) for U.S. federal income tax purposes (such as interest,
if the Notes are recharacterized, in whole or in part, as debt instruments, or Contingent Coupons if they are otherwise treated
as FDAP Income). Under a recent IRS notice, withholding under FATCA will not apply to payments of gross proceeds (other than any
amount treated as FDAP Income) of a taxable disposition, including an early redemption or redemption at maturity, of the Notes.
You should consult your tax adviser regarding the potential application of FATCA to the Notes.
In the event of any withholding on the Notes, we will
not be required to pay any additional amounts with respect to amounts so withheld.
Key
Risks
An investment in the Notes involves significant risks.
Investing in the Notes is not equivalent to investing directly in the Underlying. These risks are explained in more detail in the
“Risk Factors” sections of the accompanying product supplement and the accompanying underlying supplement. We also
urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.
Risks Relating to the Notes Generally
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Your Investment in the Notes May Result in a Loss
— The Notes differ from ordinary debt securities in that JPMorgan
Financial will not necessarily repay the full principal amount of the Notes. If JPMorgan Financial does not elect to call the Notes
and the closing price of one share of the Underlying has declined below the Downside Threshold on the Final Valuation Date, you
will be fully exposed to any depreciation of the Underlying from the Initial Value to the Final Value. In this case, JPMorgan Financial
will repay less than the full principal amount at maturity, resulting in a loss of principal that is proportionate to the negative
Underlying Return. Under these circumstances, you will lose 1% of your principal for every 1% that the Final Value is less than
the Initial Value and could lose your entire principal amount. As a result, your investment in the Notes may not perform as well
as an investment in a security that does not have the potential for full downside exposure to the Underlying.
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Credit Risks of JPMorgan Financial and JPMorgan Chase & Co.
— The Notes are unsecured and unsubordinated debt
obligations of the Issuer, JPMorgan Chase Financial Company LLC, the payment on which is fully and unconditionally guaranteed by
JPMorgan Chase & Co. The Notes will rank
pari passu
with all of our other unsecured and unsubordinated obligations,
and the related guarantee JPMorgan Chase & Co. will rank
pari passu
with all of JPMorgan Chase & Co.’s other
unsecured and unsubordinated obligations. The Notes and related guarantees are not, either directly or indirectly, an obligation
of any third party. Any payment to be made on the Notes, including any repayment of principal, depends on the ability of JPMorgan
Financial and JPMorgan Chase & Co. to satisfy their obligations as they come due. As a result, the actual and perceived creditworthiness
of JPMorgan Financial and JPMorgan Chase & Co. may affect the market value of the Notes and, in the event JPMorgan Financial
and JPMorgan Chase & Co. were to default on their obligations, you may not receive any amounts owed to you under the terms
of the Notes and you could lose your entire investment.
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As a Finance Subsidiary, JPMorgan Financial Has No Independent Operations and Limited Assets —
As a finance subsidiary
of JPMorgan Chase & Co., we have no independent operations beyond the issuance and administration of our securities. Aside
from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations of our
affiliates to make payments under loans made by us or other intercompany agreements. As a result, we are dependent upon payments
from our affiliates to meet our obligations under the Notes. If these affiliates do not make payments to us and we fail to make
payments on the Notes, you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that guarantee
will rank
pari passu
with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co.
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You Are Not Guaranteed Any Contingent Coupons
— We will not necessarily make periodic coupon payments on the Notes.
If the closing price of one share of the Underlying is less than the Coupon Barrier on any day during an Observation Period, we
will not pay you the Contingent Coupon for that Observation Period and the Contingent Coupon that would otherwise be payable will
not be accrued and will be lost. If the closing price of one share of the Underlying is less than the Coupon Barrier on any day
during each Observation Period, we will not pay you any Contingent Coupon during the term of, and you will not receive a positive
return on, your Notes. Generally, this non-payment of the Contingent Coupon coincides with a period of greater risk of principal
loss on your Notes.
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Each Contingent Coupon Is Based on the Closing Price of One Share of the Underlying on Each Day During the Applicable Observation
Period
— Whether a Contingent Coupon will be payable with respect to an Observation Period will be based solely on the
closing price of one share of the Underlying on each day during that Observation Period. If the closing price of one share of the
Underlying on any day during an Observation Period is less than the Coupon Barrier, you will not receive any Contingent Coupon
with respect to that Observation Period. As a result, a Contingent Coupon for an Observation Period may be lost after the first
day of such period, but you will not know whether you will receive a Contingent Coupon for an Observation Period until the end
of the related period.
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The Amount of Each Contingent Coupon, If Payable, Is Not Calculated Based on a Per Annum Rate
— If payable, the
Contingent Coupon with respect to any Observation Period will be equal to a fixed amount that will be the same for each Observation
Period, even though the final Observation Period is longer than each of the preceding Observation Periods. In particular,
the final Observation Period is approximately four months and each of the preceding Observation Period is approximately 3 months,
but the Contingent Coupon, if any, with respect to the final Observation Period will be no greater than any other Contingent Coupon.
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Return on the Notes Limited to the Sum of Any Contingent Coupons and You Will Not Participate in Any Appreciation of the
Underlying
— The return potential of the Notes is limited to the specified Contingent Coupon Rate, regardless of the
appreciation of the Underlying, which may be significant. In addition, the total return on the Notes will vary based on the
number of Observation Periods during which the requirements for a Contingent Coupon have been met prior to maturity or JPMorgan
Financial electing to call the Notes. Further, if JPMorgan Financial elects to call the Notes, you will not receive any Contingent
Coupons or any other payments in respect of any Observation Periods after the Call Settlement Date. If JPMorgan Financial
does not elect to call the Notes, you may be subject to the risk of decline of the Underlying, even though you are not able
to participate in any potential appreciation of the Underlying. As a result, the return on an investment in the Notes could
be less than the return on a hypothetical direct investment in any Underlying. In addition, if JPMorgan Financial does not
elect to call the Notes and the Final Value is below the Downside Threshold, you will lose some or all of your principal amount
and the overall return on the Notes may be less than the amount that would be paid on a conventional debt security of JPMorgan
Financial of comparable maturity.
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Contingent Repayment of Principal Applies Only If You Hold the Notes to Maturity
— You should be willing to hold
your Notes to maturity. If you are able to sell your Notes in the secondary market, if any, prior to maturity, you may have to
sell them at a loss relative to your initial investment even if the closing price of one share of the Underlying is above the Downside
Threshold. If by maturity the Notes have not been called, either JPMorgan Financial will repay you the full principal amount per
Note, with or without the Contingent Coupon, or, if the Underlying closes below the Downside Threshold on the Final Valuation Date,
JPMorgan Financial will repay less than the principal amount, if anything, at maturity, resulting in a loss on your principal amount
that is proportionate to the decline of the Underlying from the Initial Value to the Final Value. This contingent repayment of
principal applies only if you hold your Notes to maturity.
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A Higher Contingent Coupon Rate and/or a Lower Coupon Barrier and/or Downside Threshold May Reflect Greater Expected Volatility
of the Underlying, Which Is Generally Associated With a Greater Risk of Loss
— Volatility is a measure of the degree
of variation in the price of the Underlying over a period of time. The greater the expected volatility of the Underlying
at the time the terms of the Notes are set, the greater the expectation is at that time that the Underlying could close below the
Coupon Barrier on any day during any Observation Period, resulting in the loss of one or more, or all, Contingent Coupon payments,
or below the Downside Threshold on the Final Valuation Date, resulting in the loss of a significant portion or all of your principal
at maturity. In addition, the economic terms of the Notes, including the Contingent Coupon Rate, the Coupon Barrier and the
Downside Threshold, are based, in part, on the expected volatility of the Underlying at the time the terms of the Notes are set,
where a higher expected volatility will generally be reflected in a higher Contingent Coupon Rate than the fixed rate we would
pay on conventional debt securities of the same maturity and/or on otherwise comparable securities and/or a lower Coupon Barrier
and/or a lower Downside Threshold as compared to otherwise comparable securities. Accordingly, a higher Contingent Coupon
Rate will generally be indicative of a greater risk of loss while a lower Coupon Barrier or Downside Threshold does not necessarily
indicate that the Notes have a greater likelihood of paying Contingent Coupon payments or returning your principal at maturity.
You should be willing to accept the downside market risk of the Underlying and the potential loss of some or all of your principal
at maturity.
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Call and Reinvestment Risk
— JPMorgan Financial may, in its sole discretion, elect to call the Notes on any Observation
End Date (other than the Final Valuation Date), regardless of the closing price of one share of the Underlying on that Observation
End Date. If JPMorgan Financial elects to call your Notes early, you will no longer have the opportunity to receive any Contingent
Coupons after the applicable Call Settlement Date. The first Observation End Date, and the first potential date on which JPMorgan
Financial may elect to call the Notes, occurs after approximately three months and therefore you may not have the opportunity to
receive any Contingent Coupons after approximately three months. In the event JPMorgan Financial elects to call the Notes, there
is no guarantee that you would be able to reinvest the proceeds at a comparable return and/or with a comparable Contingent Coupon
Rate for a similar level of risk.
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It is more likely that JPMorgan
Financial will elect to call the Notes prior to maturity when the expected interest payable on the Notes is greater than the interest
that would be payable on other instruments issued by JPMorgan Financial of comparable maturity, terms and credit rating trading
in the market. The greater likelihood of JPMorgan Financial calling the Notes in that environment increases the risk that you will
not be able to reinvest the proceeds from the called Notes in an equivalent investment with a similar Contingent Coupon Rate. JPMorgan
Financial is less likely to call the Notes prior to maturity when the expected interest payable on the Notes is less than the interest
that would be payable on other comparable instruments issued by JPMorgan Financial, which includes when the closing price of one
share of the Underlying is less than the Coupon Barrier. Therefore, the Notes are more likely to remain outstanding when the expected
interest payable on the Notes is less than what would be payable on other comparable instruments and when your risk of not receiving
a Contingent Coupon is relatively higher.
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Potential Conflicts
— We and our affiliates play a variety of roles in connection with the issuance of the Notes,
including acting as calculation agent and hedging our obligations under the Notes and making the assumptions used to determine
the pricing of the Notes and the estimated value of the Notes when the terms of the Notes are set, which we refer to as the estimated
value of the Notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests and the economic interests
of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the Notes. In
addition, our and JPMorgan Chase & Co.’s business activities, including hedging and trading activities, could cause our
and JPMorgan Chase & Co.’s economic interests to be adverse to yours and could adversely affect any payment on the Notes
and the value of the Notes. It is possible that hedging or trading activities of ours or our affiliates in connection with the
Notes could result in substantial returns for us or our affiliates while the value of the Notes declines. Please refer to “Risk
Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement for additional information
about these risks.
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The Estimated Value of the Notes Will Be Lower Than the Original Issue Price (Price to Public) of the Notes
—
The estimated value of the Notes is only an estimate determined by reference to several factors. The original issue price of the
Notes will exceed the estimated value of the Notes because costs associated with selling, structuring and hedging the Notes are
included in the original issue price of the Notes. These costs include the selling commissions, the projected profits, if any,
that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the Notes and the estimated
cost of hedging our obligations under the Notes. See “The Estimated Value of the Notes” in this pricing supplement.
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The Estimated Value of the Notes Does Not Represent Future Values of the Notes and May Differ from Others’ Estimates
— The estimated value of the Notes is determined by reference to internal pricing models of our affiliates when the terms
of the Notes are set. This estimated value of the Notes is based on market conditions and other relevant factors existing at that
time and assumptions about market parameters, which can include volatility, dividend rates, interest rates and other factors. Different
pricing models and assumptions could provide valuations for the Notes that are greater than or less than the estimated value of
the Notes. In addition, market conditions and other relevant factors in the future may change, and any assumptions may prove to
be incorrect. On future dates, the value of the Notes could change significantly based on, among other things, changes in market
conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and other relevant factors, which
may impact the price, if
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any, at which JPMS would be willing
to buy Notes from you in secondary market transactions. See “The Estimated Value of the Notes” in this pricing supplement.
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The Estimated Value of the Notes Is Derived by Reference to an Internal Funding Rate
— The internal funding rate
used in the determination of the estimated value of the Notes is based on, among other things, our and our affiliates’ view
of the funding value of the Notes as well as the higher issuance, operational and ongoing liability management costs of the Notes
in comparison to those costs for the conventional fixed-rate debt of JPMorgan Chase & Co. The use of an internal funding rate
and any potential changes to that rate may have an adverse effect on the terms of the Notes and any secondary market prices of
the Notes. See “The Estimated Value of the Notes” in this pricing supplement.
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The Value of the Notes as Published by JPMS (and Which May Be Reflected on Customer Account Statements) May Be Higher Than
the Then-Current Estimated Value of the Notes for a Limited Time Period
— We generally expect that some of the costs
included in the original issue price of the Notes will be partially paid back to you in connection with any repurchases of your
Notes by JPMS in an amount that will decline to zero over an initial predetermined period. These costs can include selling commissions,
projected hedging profits, if any, and, in some circumstances, estimated hedging costs and our internal secondary market funding
rates for structured debt issuances. See “Secondary Market Prices of the Notes” in this pricing supplement for additional
information relating to this initial period. Accordingly, the estimated value of your Notes during this initial period may be lower
than the value of the Notes as published by JPMS (and which may be shown on your customer account statements).
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Secondary Market Prices of the Notes Will Likely Be Lower Than the Original Issue Price of the Notes
— Any secondary
market prices of the Notes will likely be lower than the original issue price of the Notes because, among other things, secondary
market prices take into account our internal secondary market funding rates for structured debt issuances and, also, because secondary
market prices (a) exclude selling commissions and (b) may exclude projected hedging profits, if any, and estimated hedging costs
that are included in the original issue price of the Notes. As a result, the price, if any, at which JPMS will be willing to buy
Notes from you in secondary market transactions, if at all, is likely to be lower than the original issue price. Any sale by you
prior to the Maturity Date could result in a substantial loss to you. See the immediately following risk factor for information
about additional factors that will impact any secondary market prices of the Notes.
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The Notes are not designed to be
short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity. See “—
Lack of Liquidity” below.
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Many Economic and Market Factors Will Impact the Value of the Notes
— As described under “The Estimated
Value of the Notes” in this pricing supplement, the Notes can be thought of as securities that combine a fixed-income debt
component with one or more derivatives. As a result, the factors that influence the values of fixed-income debt and derivative
instruments will also influence the terms of the Notes at issuance and their value in the secondary market. Accordingly, the secondary
market price of the Notes during their term will be impacted by a number of economic and market factors, which may either offset
or magnify each other, aside from the selling commissions, projected hedging profits, if any, estimated hedging costs and the price
of one share of the Underlying, including:
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any actual or potential change in our or JPMorgan
Chase & Co.’s creditworthiness or credit spreads;
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customary bid-ask spreads for similarly sized trades;
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our internal secondary market funding rates for structured
debt issuances;
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the actual and expected volatility in the price of
one share of the Underlying;
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the time to maturity of the Notes;
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whether the closing price of one share of the Underlying has been, or is expected to be, less than the Coupon Barrier on any
day during any Observation Period and whether the Final Value is expected to be less than the Downside Threshold;
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the dividend rates on the Underlying and the equity
securities held by the Underlying;
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the occurrence of certain events affecting the Underlying that may or may not require an adjustment to the closing price and
the Share Adjustment Factor of the Underlying, including a merger or acquisition;
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interest and yield rates in the market generally;
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the exchange rates and the volatility of the exchange rates between the U.S. dollar and each of the currencies in which the
equity securities held by the Underlying trade and the correlation among those rates and the price of the Underlying; and
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a variety of other economic, financial, political,
regulatory and judicial events.
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Additionally, independent pricing
vendors and/or third party broker-dealers may publish a price for the Notes, which may also be reflected on customer account statements.
This price may be different (higher or lower) than the price of the Notes, if any, at which JPMS may be willing to purchase your
Notes in the secondary market.
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Investing in the Notes Is Not Equivalent to Investing in the Underlying or the Equity Securities Composing the Underlying
— Investing in the Notes is not equivalent to investing in the Underlying or the equity securities held by the Underlying.
As an investor in the Notes, you will not have any ownership interest or rights in the Underlying or the equity securities held
by the Underlying, such as voting rights, dividend payments or other distributions.
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Your Return on the Notes Will Not Reflect Dividends on the Underlying or the Equity Securities Composing the Underlying
— Your return on the Notes will not reflect the return you would realize if you actually owned the Underlying or the equity
securities held by the Underlying and received the dividends on the Underlying or those equity securities. This is because the
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calculation agent will determine
whether a Contingent Coupon is payable and will calculate the amount payable to you at maturity of the Notes by reference to the
closing price of one share of the Underlying on the relevant day during the relevant Observation Period and the Final Valuation
Date, respectively, without taking into consideration the value of dividends on the Underlying or the equity securities held by
the Underlying.
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No Affiliation with the Underlying or the Issuers of the Equity Securities Composing the Underlying
—
We are not affiliated with the Underlying or, to our knowledge, the issuers of the equity securities held by the Underlying.
We have not independently verified the information about the Underlying or the issuers of the equity securities held by the Underlying
contained in this pricing supplement. You should make your own investigation into the Underlying and the issuers of the equity
securities held by the Underlying. We are not responsible for the public disclosure of information by the Underlying or the issuers
of the equity securities held by the Underlying, whether contained in SEC filings or otherwise.
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No Assurances That the Investment View Implicit in the Notes Will Be Successful
— While the Notes are structured
to provide for Contingent Coupons if the Underlying does not close below the Coupon Barrier on any day during the Observation Periods,
we cannot assure you of the economic environment during the term or at maturity of your Notes.
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Lack of Liquidity
— The Notes will not be listed on any securities exchange. JPMS intends to offer to purchase
the Notes in the secondary market, but is not required to do so. Even if there is a secondary market, it may not provide enough
liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely to make a secondary market for the
Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which JPMS is willing
to buy the Notes.
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Potentially Inconsistent Research, Opinions or Recommendations by JPMS, UBS or Their Affiliates
— JPMS, UBS or
their affiliates may publish research, express opinions or provide recommendations that are inconsistent with investing in or holding
the Notes, and that may be revised at any time. Any such research, opinions or recommendations may or may not recommend that investors
buy or hold the Underlying and could affect the price of the Underlying, and therefore the market value of the Notes.
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Tax Treatment
— Significant aspects of the tax treatment of the Notes are uncertain. You should consult your tax
adviser about your tax situation.
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Potential JPMorgan Financial Impact on the Price of the Underlying
— Trading or transactions by JPMorgan Financial
or its affiliates in the Underlying and/or over-the-counter options, futures or other instruments with returns linked to the performance
of the Underlying may adversely affect the price of the Underlying and, therefore, the market value of the Notes.
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The Final Terms and Valuation of the Notes Will Be Finalized on the Trade Date and
Provided in the Pricing Supplement
— The final terms of the Notes will be based on relevant market conditions when the
terms of the Notes are set and will be finalized on the Trade Date and provided in the pricing supplement. In particular, each
of the estimated value of the Notes and the Contingent Coupon Rate will be finalized on the Trade Date and provided in the pricing
supplement, and each may be as low as the applicable minimum set forth on the cover of this pricing supplement. Accordingly, you
should consider your potential investment in the Notes based on the minimums for the estimated value of the Notes and the Contingent
Coupon Rate.
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Risks Relating to the Underlying
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There Are Risks Associated with the Underlying
—
Although shares of the Underlying are listed for trading on a securities exchange and a number of similar products
have been trading on a securities exchange for varying periods of time, there is no assurance that an active trading market will
continue for the shares of the Underlying or that there will be liquidity in the trading market. The Underlying is subject
to management risk, which is the risk that the investment strategies of the Underlying’s investment adviser, the implementation
of which is subject to a number of constraints, may not produce the intended results. These constraints could adversely affect
the market price of the shares of the Underlying, and consequently, the value of the Notes.
|
|
t
|
The Performance and Market Value of the Underlying, Particularly During Periods of Market Volatility, May Not Correlate
with the Performance of the Underlying’s Underlying Index as well as the Net Asset Value per Share
— The Underlying
does not fully replicate its Underlying Index (as defined under “The Underlying” below) and may hold securities different
from those included in its Underlying Index.
In addition,
the performance of the Underlying will reflect additional transaction costs and fees that are not included in the calculation of
its Underlying Index.
All of these factors may lead to a lack
of correlation between the performance of the Underlying and its Underlying Index.
In
addition, corporate actions with respect to the equity securities underlying the Underlying (such as mergers and spin-offs) may
impact the variance between the performances of the Underlying and its Underlying Index.
Finally,
because the shares of the Underlying are traded on a securities exchange and are subject to market supply and investor demand,
the market value of one share of the Underlying may differ from the net asset value per share of the Underlying.
|
During periods of market volatility, securities underlying
the Underlying may be unavailable in the secondary market, market participants may be unable to calculate accurately the net asset
value per share of the Underlying and the liquidity of the Underlying may be adversely affected.
This
kind of market volatility may also disrupt the ability of market participants to create and redeem shares of the Underlying.
Further,
market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell
shares of the Underlying.
As a result, under these circumstances,
the market value of shares of the Underlying may vary substantially from the net asset value per share of the Underlying.
For
all of the foregoing reasons, the performance of the Underlying may not correlate with the performance of its Underlying Index
as well as the net asset value per share of the Underlying, which could materially and adversely affect the value of the Notes
in the secondary market and/or reduce any payment on the Notes.
|
¨
|
Non-U.S. Securities Risk
—The equity securities held by the Underlying have been issued by non-U.S. companies.
Investments in securities linked to the value of such non-U.S. equity securities involve risks associated with the securities markets
in the home countries of the issuers of those non-U.S. equity securities, including risks of volatility in those markets, governmental
intervention in
|
those markets and cross shareholdings in companies
in certain countries. Also, there is generally less publicly available information about companies in some of these jurisdictions
than there is about U.S. companies that are subject to the reporting requirements of the SEC.
|
¨
|
The Securities Are Subject to Currency Exchange Risk
— Because the prices of the equity securities held by the
Underlying are converted into U.S. dollars for purposes of calculating the net asset value of the Underlying, holders of the Securities
will be exposed to currency exchange rate risk with respect to each of the currencies in which the equity securities held by the
Underlying trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the
U.S. dollar and the relative weight of equity securities held by the Underlying denominated in each of those currencies.
If, taking into account the relevant weighting, the U.S. dollar strengthens against those currencies, the price of the Underlying
will be adversely affected and any payment on the Securities may be reduced. Of particular importance to potential currency
exchange risk are:
|
|
t
|
existing and expected rates of inflation;
|
|
t
|
existing and expected interest rate levels;
|
|
t
|
the balance of payments in the countries issuing those currencies and the United States and between each country and its major
trading partners;
|
|
t
|
political, civil or military unrest in the countries issuing those currencies and the United States; and
|
|
t
|
the extent of government surpluses or deficits in the countries issuing those currencies and the United States.
|
All of these factors are in turn sensitive to the
monetary, fiscal and trade policies pursued by the governments of the countries issuing those currencies and the United States
and other countries important to international trade and finance.
|
t
|
Anti-Dilution Protection Is Limited
—
Although
the calculation agent will adjust the closing price of one share of the Underlying for certain events affecting the Underlying,
the calculation agent is not required to make an adjustment for every event that can affect the Underlying. If an event occurs
that does not require the calculation agent to adjust the closing price of one share of the Underlying, the market value of your
Notes and any payment on the Notes may be materially and adversely affected.
|
Hypothetical
Examples
The examples below illustrate the hypothetical payments
on a Coupon Payment Date, upon an issuer-elected call or at maturity under different hypothetical scenarios for a $10.00 Note on
an offering of the Notes linked to a hypothetical Underlying and assume an Initial Value of $100.00, a Downside Threshold and Coupon
Barrier of $75.00* (which is 75%* of the hypothetical Initial Value) and a Contingent Coupon Rate of 2.00% per Observation Period.
The hypothetical Initial Value has been chosen for illustrative purposes only and may not represent a likely actual Initial Value.
The actual Initial Value and resulting Downside Threshold and Coupon Barrier of the Underlying will be based on the closing price
of one share of the Underlying on the Trade Date. For historical data regarding the actual closing prices of one share of
the Underlying, please see the historical information set forth under “The Underlying” in this pricing supplement.
We cannot predict the closing price of one share of the Underlying on any day during the term of the Notes, including on any day
during any Observation Period or on the Final Valuation Date. You should not take these examples as an indication or assurance
of the expected performance of the Notes. Numbers in the examples below have been rounded for ease of analysis.
Principal Amount:
|
$10.00
|
Term:
|
Approximately 22 months (unless earlier called)
|
Hypothetical Initial Value:
|
$100.00
|
Hypothetical Contingent Coupon Rate:
|
2.00% per Observation Period
|
Observation Periods/Observation End Dates:
|
As specified under “Observation Periods, Observation End Dates and Coupon Payment Dates” in this pricing supplement
|
Hypothetical Downside Threshold:
|
$75.00 (which is 75% of the hypothetical Initial Value)
|
Hypothetical Coupon Barrier:
|
$75.00 (which is 75% of the hypothetical Initial Value)
|
|
*
|
The
actual value of any Contingent Coupon payments you will receive over the term of the
Notes and the actual value of the payment upon an issuer-elected call or at maturity
applicable to your Notes may be more or less than the amounts displayed in these hypothetical
scenarios.
|
The examples below are hypothetical. These examples
are intended to illustrate (a) the effect of an issuer-elected call, (b) how the payment of a Contingent Coupon with respect to
any Observation Period will depend on whether the closing price of one share of the Underlying is less than the Coupon Barrier
on any day during that Observation Period, (c) how the value of the payment at maturity on the Notes will depend on whether the
Final Value of the Underlying is less than the Downside Threshold and (d) how the total return on the Notes may be less than the
total return on a direct investment in the Underlying in certain scenarios. The “total return” as used in this pricing
supplement is the number, expressed as a percentage, that results from comparing the total payments per $10.00 principal amount
Note over the term of the Notes to the $10.00 initial issue price.
Example 1 — JPMorgan Financial Elects to
Call the Notes on the First Observation End Date
Observation
Period
|
|
Lowest
Closing Price During Applicable Observation Period
|
|
Payment
(per Note)
|
First Observation Period
|
|
$90.00
|
|
Issuer elects to call the Notes. Closing price above the Coupon Barrier on each day during Observation Period; Issuer pays Contingent Coupon of $0.20 on Call Settlement Date.
|
Total Payments (per $10.00
Note):
|
|
Payment on Call Settlement Date:
|
$10.20 ($10.00 + $0.20)
|
|
|
Total:
|
$10.20
|
|
|
Total Return:
|
2.00%
|
On the first Observation End Date, JPMorgan Financial
elects to call the Notes. Because the closing price of one share of the Underlying is above the Coupon Barrier on each day during
the first Observation Period, JPMorgan Financial will pay you on the Call Settlement Date $10.20 per $10.00 principal amount Note,
which is equal to your principal amount
plus
the Contingent Coupon due on the Coupon Payment Date that is also the Call
Settlement Date. No further amounts will be owed to you under the Notes.
Example 2 — Notes Are NOT Called and the
Final Value Is Above the Downside Threshold
Observation
Period
|
|
Lowest
Closing Price During Applicable Observation Period
|
|
Final
Value
|
|
Payment
(per Note)
|
First Observation Period
|
|
$105.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price above the Coupon Barrier on each day during Observation Period; Issuer pays Contingent Coupon of $0.20 on first Coupon Payment Date.
|
Second Observation Period
|
|
$80.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price above the Coupon Barrier on each day during Observation Period; Issuer pays Contingent Coupon of $0.20 on second Coupon Payment Date.
|
Third Observation Period
|
|
$45.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to Sixth Observation Periods
|
|
Below Coupon Barrier
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to sixth Coupon Payment Dates.
|
Seventh Observation Period (the final Observation Period)
|
|
$80.00
|
|
$85.00
|
|
Notes NOT callable. Final Value above the Downside Threshold and closing price above the Coupon Barrier on each day during Observation Period; Issuer repays principal
plus
pays Contingent Coupon of $0.20 on Maturity Date.
|
Total
Payments (per $10.00 Note):
|
|
Payment at Maturity:
|
$10.20 ($10.00 + $0.20)
|
|
|
Prior Contingent Coupons:
|
$0.40 ($0.20 × 2)
|
|
|
Total:
|
$10.60
|
|
|
Total Return:
|
6.00%
|
In this example, the Issuer does not elect to call
the Notes and the Notes remain outstanding until maturity. Because the Final Value of is greater than or equal to the Downside
Threshold and the closing price of one share of the Underlying is greater than or equal to the Coupon Barrier on each day during
the final Observation Period, JPMorgan Financial will pay you on the Maturity Date $10.20 per $10.00 principal amount Note, which
is equal to your principal amount
plus
the Contingent Coupon due on the Coupon Payment Date that is also the Maturity Date.
In addition, because the closing price of one share
of the Underlying was greater than or equal to the Coupon Barrier on each day during the first and second Observation Periods,
JPMorgan Financial will pay the Contingent Coupon of $0.20 on the first and second Coupon Payment Dates. However, because the closing
price of one share of the Underlying was less than the Coupon Barrier on at least one day during each of the third through sixth
Observation Periods, JPMorgan Financial will not pay any Contingent Coupon on the Coupon Payment Date following each of the applicable
Observation Periods. Accordingly, JPMorgan Financial will have paid a total of $10.60 per $10.00 principal amount Note for a 6%
total return over the approximately 22 month term of the Notes.
Example 3 — Notes Are NOT Called and the
Final Value Is Above The Downside Threshold
Observation
Period
|
|
Lowest
Closing Price During Applicable Observation Period
|
|
Final
Value
|
|
Payment
(per Note)
|
First Observation Period
|
|
$105.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price above the Coupon Barrier on each day during Observation Period; Issuer pays Contingent Coupon of $0.20 on first Coupon Payment Date.
|
Second Observation Period
|
|
$80.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price above the Coupon Barrier on each day during Observation Period; Issuer pays Contingent Coupon of $0.20 on second Coupon Payment Date.
|
Third Observation Period
|
|
$60.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to Sixth Observation Periods
|
|
Below Coupon Barrier
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to sixth Coupon Payment Dates.
|
Seventh Observation Period (the final Observation Period)
|
|
$60.00
|
|
$80.00
|
|
Notes NOT callable. Final Value above the Downside Threshold but closing price below the Coupon Barrier on at least one day during Observation Period; Issuer repays principal but does not pay Contingent Coupon.
|
Total
Payments (per $10.00 Note):
|
|
Payment at Maturity:
|
$10.00
|
|
|
Prior Contingent Coupons:
|
$0.40 ($0.20 × 2)
|
|
|
Total:
|
$10.40
|
|
|
Total Return:
|
4.00%
|
In this example, the Issuer does not elect to
call the Notes and the Notes remain outstanding until maturity. Because the Final Value is greater than or equal to the Downside
Threshold but the closing price of one share of the Underlying is less than the Coupon Barrier on at least one day during the
final Observation Period, JPMorgan Financial will pay you on the Maturity Date $10.00 per $10.00 principal amount Note, which
is equal to your principal amount, but JPMorgan Financial will not pay any Contingent Coupon on the Maturity Date.
In addition, because the closing price of one share of
the Underlying was greater than or equal to the Coupon Barrier on each day during the first and second Observation Periods, JPMorgan
Financial will pay the Contingent Coupon of $0.20 on the first and second Coupon Payment Dates. However, because the closing price
of one share of the Underlying was less than the Coupon Barrier on at least one day during each of the third through sixth Observation
Periods, JPMorgan Financial will not pay any Contingent Coupon on the Coupon Payment Date following each of the applicable Observation
Periods. Accordingly, JPMorgan Financial will have paid a total of $10.40 per $10.00 principal amount Note for a 4.00% total return
over the approximately 22 month term of the Notes.
Example
4 — Notes Are NOT Called and the Final Value Is Below The Downside Threshold
Observation
Period
|
|
Lowest
Closing Price During Applicable Observation Period
|
|
Final
Value
|
|
Payment
(per Note)
|
First Observation Period
|
|
$30.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on first Coupon Payment Date.
|
Second Observation Period
|
|
$45.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on second Coupon Payment Date.
|
Third Observation Period
|
|
$55.00
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to Sixth Observation Periods
|
|
Below Coupon Barrier
|
|
N/A
|
|
Notes NOT called at the election of the Issuer. Closing price below the Coupon Barrier on at least one day during Observation Period; Issuer DOES NOT pay Contingent Coupon on any of the fourth to sixth Coupon Payment Dates.
|
Seventh Observation Period (the final Observation Period)
|
|
$45.00
|
|
$45.00
|
|
Notes NOT callable. Final Value below the Downside Threshold; Issuer DOES NOT pay Contingent Coupon on Maturity Date, and Issuer will repay less than the principal amount resulting in a loss proportionate to the decline of the Underlying.
|
Total
Payments (per $10.00 Note):
|
|
Payment at Maturity:
|
$4.50
|
|
|
Prior Contingent Coupons:
|
$0.00
|
|
|
Total:
|
$4.50
|
|
|
Total Return:
|
-55.00%
|
In this example, the Issuer does not elect to call the Notes
and the Notes remain outstanding until maturity. Because the Final Value is less than the Downside Threshold on the Final Valuation
Date and the Underlying Return is -55%, at maturity, JPMorgan Financial will pay you a total of $4.50 per $10.00 principal amount.
$10.00 × (1 + Underlying Return)
In addition, because the closing price of one share of the Underlying
is less than the Coupon Barrier on at least one day during each Observation Period, JPMorgan Financial will not pay any Contingent
Coupons over the term of the Notes.
Accordingly, JPMorgan Financial will have paid a total of $4.50
per $10.00 principal amount Note, for a -55.00% total return over the approximately 22 month term of the Notes.
The hypothetical returns and hypothetical payments on the Notes
shown above apply
only if you hold the Notes for their entire term or until called
. These hypotheticals do not reflect fees
or expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical
returns and hypothetical payments shown above would likely be lower
The
Underlying
The iShares
®
MSCI EAFE ETF is an exchange-traded
fund of iShares
®
Trust, a registered investment company, which seeks to track the investment results, before fees
and expenses, of an index composed of large- and mid-capitalization developed market equities, excluding the United States and
Canada, which we refer to as the Underlying Index with respect to the iShares
®
MSCI EAFE ETF. The Underlying Index
for the iShares
®
MSCI EAFE ETF is currently the MSCI EAFE
®
Index. The MSCI EAFE
®
Index
is a free float-adjusted market capitalization index intended to measure the equity market performance of the developed equity
markets in Europe, Asia, Australia and New Zealand. For additional information about the iShares
®
MSCI EAFE ETF,
see “Fund Descriptions — The iShares
®
ETFs” in the accompanying underlying supplement.
Historical Information
The following table sets forth the quarterly high
and low closing prices of one share of the Underlying, based on daily closing prices of one share of the Underlying as reported
by the Bloomberg Professional
®
service (“Bloomberg”), without independent verification. This information
given below is for the four calendar quarters in each of 2011, 2012, 2013, 2014 and 2015 and the first and second calendar quarters
of 2016. Partial data is provided for the third calendar quarter of 2016. The closing price of one share of the Underlying on September
27, 2016 was $58.99. The actual Initial Value of the Underlying will be the closing price of one share of the Underlying on the
Trade Date. We obtained the closing prices of one share of the Underlying above and below from Bloomberg, without independent verification.
The closing prices may have been adjusted by Bloomberg for certain actions, such as stock splits. You should not take the historical
prices of one share of the Underlying as an indication of future performance.
Quarter Begin
|
Quarter End
|
Quarterly High
|
Quarterly Low
|
Close
|
1/1/2011
|
3/31/2011
|
$61.91
|
$55.31
|
$60.09
|
4/1/2011
|
6/30/2011
|
$63.87
|
$57.10
|
$60.14
|
7/1/2011
|
9/30/2011
|
$60.80
|
$46.66
|
$47.75
|
10/1/2011
|
12/31/2011
|
$55.57
|
$46.45
|
$49.53
|
1/1/2012
|
3/31/2012
|
$55.80
|
$49.15
|
$54.90
|
4/1/2012
|
6/30/2012
|
$55.51
|
$46.55
|
$49.96
|
7/1/2012
|
9/30/2012
|
$55.15
|
$47.62
|
$53.00
|
10/1/2012
|
12/31/2012
|
$56.88
|
$51.96
|
$56.82
|
1/1/2013
|
3/31/2013
|
$59.89
|
$56.90
|
$58.98
|
4/1/2013
|
6/30/2013
|
$63.53
|
$57.03
|
$57.38
|
7/1/2013
|
9/30/2013
|
$65.05
|
$57.55
|
$63.79
|
10/1/2013
|
12/2/2013
|
$67.06
|
$62.71
|
$67.06
|
1/1/2014
|
3/31/2014
|
$68.03
|
$62.31
|
$67.17
|
4/1/2014
|
6/30/2014
|
$70.67
|
$66.26
|
$68.37
|
7/1/2014
|
9/30/2014
|
$69.25
|
$64.12
|
$64.12
|
10/1/2014
|
12/31/2014
|
$64.51
|
$59.53
|
$60.84
|
1/1/2015
|
3/31/2015
|
$65.99
|
$58.48
|
$64.17
|
4/1/2015
|
6/30/2015
|
$68.42
|
$63.49
|
$63.49
|
7/1/2015
|
9/30/2015
|
$65.46
|
$56.25
|
$57.32
|
10/1/2015
|
12/31/2015
|
$62.06
|
$57.50
|
$58.75
|
1/1/2016
|
3/31/2016
|
$57.80
|
$51.38
|
$57.13
|
4/1/2016
|
6/30/2016
|
$59.87
|
$52.64
|
$55.81
|
7/1/2016
|
9/27/2016*
|
$59.86
|
$54.44
|
$58.99
|
*
|
As of the date of this pricing supplement, available information for the
third calendar quarter of 2016 includes data for the period from July 1, 2016 through September 27, 2016. Accordingly,
the “Quarterly High,” “Quarterly Low” and “Close” data indicated are for this shortened
period only and do not reflect complete data for the third calendar quarter of 2016.
|
The graph below illustrates the daily performance
of the Underlying from January 3, 2006 through September 27, 2016, based on information from Bloomberg, without independent verification.
The dotted line represents a hypothetical Downside Threshold and Coupon Barrier of $44.24, equal to 75% of the closing price of
one share of the Underlying on September 27, 2016. The actual Downside Threshold and Coupon Barrier will be based on the closing
price of one share of the Underlying on the Trade Date (the Initial Value) and will equal 75% of the Initial Value.
Past performance of the Underlying is not indicative
of the future performance of the Underlying.